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General Donlee Income Fund Reports Consistent Operational Performance in 2008
Toronto, Canada, Mar 9, 2009 -
Fund declares one-time special distribution of $0.08 per Unit
General Donlee Income Fund (the "Fund" or
"General Donlee") (TSX: GDI.UN) today announced steady results for the fourth
quarter and the fiscal year ended December 31, 2008. For the fourth
consecutive year, the Fund`s sales exceeded those of the prior year, which in
turn generated increased distributable cash in the same period.
General Donlee`s fourth quarter 2008 results reflected its continuing
steady performance:
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- Sales were $14.6 million, up 13% from the Q4 2007 sales level of
$12.9 million
- Sales order backlog remained steady at $50.6 million
- Distributable cash was $3.4 million or $0.615 per Unit, as compared
to $2.9 million or $0.367 per Unit in the same period last year
- Distributions paid to Unitholders for the quarter, including the
December special distribution, were $0.35 per Unit.
- The Fund repurchased 158,200 in trust Units through a Normal Course
Issuer Bid
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The Fund repurchased 158,200 Units at prevailing market prices in the
fourth quarter of 2008, as a means of further enhancing Unitholder value. With
these transactions complete, the Fund, through its normal course issuer bid
and two substantial issuer bids, repurchased and cancelled 2,276,137 Units
during 2008. The Fund also repurchased and cancelled $2,778,000 in principal
amount of convertible debentures under a normal course issuer bid, resulting
in a gain of $0.6 million.
The Fund's net income of $1.7 million in the fourth quarter of 2008 was
lower than the $2.5 million in the comparable period in 2007, reflecting the
current volatility in the financial markets. This economic downturn created a
financial loss in the value of General Donlee's marketable securities. In
addition, the declining value of the Canadian dollar created a loss on the
foreign exchange contracts that were in place at December 31, 2008. Excluding
these two non-cash changes, fourth quarter net income would have been $4.3
million - an increase of $1.8 million over the same quarter in 2007.
Overall in 2008, cash flow from operations increased; however, due to
recent market conditions, the Fund experienced non-cash losses on its
marketable securities and derivative contracts. Nevertheless, the Fund's
operating performance during the year enabled the Fund to pay monthly regular
distributions to Unitholders at the current annualized rate of $1.08 per Unit
and a special one-time distribution of $0.08 per Unit.
Financial Highlights
The following summary of financial data presents the consolidated results
of operations of the Fund for the three-month and twelve-month periods ended
December 31, 2008, including comparative results for the same periods in 2007.
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($ millions, except Unit Three Months Twelve Months
and per Unit Ended Ended
amounts, unaudited) Dec. 31/08 Dec. 31/07 Dec. 31/08 Dec. 31/07
---------- ---------- ---------- ----------
Operations
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Sales 14.6 12.9 53.7 52.1
Gross profit 5.6 3.9 16.5 14.7
Net income 1.7 2.5 6.8 9.5
Basic income per Unit $ 0.304(a) $ 0.315(b) $ 1.041(c) $ 1.124(d)
Distributions
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Distributable cash(1) 3.4 2.9 10.1 9.9
Distributable cash
per Unit(1) $ 0.615(a) $ 0.367(b) $ 1.559(c) $ 1.171(d)
Distributions paid 1.9 2.1 7.4 8.7
Distributions paid
per Unit $ 0.350(a) $ 0.270(b) $ 1.160(c) $ 1.030(d)
(1) Distributable cash is not a defined term under Canadian generally
accepted accounting principles ("GAAP"), but is determined by the
Fund as cash flow provided by operating activities (adjusted to
remove changes in non-cash working capital items), less the reserve
for maintenance capital expenditures, for which Management included
$1.25 million for 2008 and 2007. See reconciliation of distributable
cash below. Management believes that this liquidity measure is a
useful supplemental measure of performance, as it provides investors
with an indication of the amount of cash available for distribution
to Unitholders. Investors are cautioned, however, that distributable
cash should not be construed as an alternative to using net earnings
as a measure of profitability, or to using the statements of cash
flows. Further, the Fund's method of calculating distributable cash
may not be comparable to measures used by other companies or trusts.
For details of distributable cash, see the table below.
(a) Based on weighted average of 5,606,957 Units outstanding for the
fourth quarter of 2008.
(b) Based on weighted average of 8,020,916 Units outstanding for the
fourth quarter of 2007.
(c) Based on weighted average of 6,507,840 Units outstanding for the
year 2008.
(d) Based on weighted average of 8,447,284 Units outstanding for the
year 2007.
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Overall Financial Performance for 2008
In 2008, General Donlee delivered a fourth consecutive year of increased
sales. Overall, sales reached $53.7 million, up by $1.6 million or 3% above
the sales level achieved in 2007. The aerospace and power generation division
delivered sales of $32.5 million, reflecting a decrease of $2.0 million, or
6%, from 2007, mostly attributed to the lower military aerospace sales in
2008. General Donlee's industrial products division produced 2008 sales of
$21.2 million, an increase of $3.6 million, thanks to the aerospace landing
gear contract it earned in late 2007. General Donlee's improved sales led to
increases in gross profit and cash flows from operations in 2008 as compared
to 2007.
The Fund achieved net income of $6.8 million for the twelve months ended
December 31, 2008, compared to $9.5 million in 2007. This decrease in net
income was caused by the decrease in the value of General Donlee's marketable
securities and the decreasing value of the Canadian dollar. The decreased net
income in 2008 did not, however, impact on the calculation of distributable
cash(1) which was $10.1 million, or $1.559 per Unit, an increase of 2% over
the $9.9 million or $1.171 per Unit in distributable cash(1) in the comparable
period in 2007. In 2008, distributions paid were $7.4 million or $1.160 per
Unit, compared to $8.7 million or $1.030 per Unit in 2007, the increase in the
per Unit distributions being a result of our unit buybacks in 2008.
General Donlee continues to maintain ample working capital to support its
current operations, as well as additional credit facilities to support future
growth. At December 31, 2008, General Donlee had working capital of
$19.9 million and a current ratio of 2.8:1; this decrease was largely caused
by the cash used to buy back 2,276,137 Units at a cost of $21.4 million and
$2.78 million in principal amount of convertible debentures.
General Donlee has continued to invest in new equipment that will further
increase production capacity, allowing it to capture a greater share of the
market when the economy rebounds.
Distributable Cash(1)
Distributable cash(1) was $3.4 million, or $0.615 per Unit, as compared
to the three months ended December 31, 2007, when distributable cash(1) was
$2.9 million, or $0.367 per Unit.
For the year ended December 31, 2008, distributable cash(1) was $10.1
million, or $1.559 per Unit, as compared to the year ended December 31, 2007,
when distributable cash(1) was $9.9 million, or $1.171 per Unit.
The increase in the per Unit value of distributable cash for 2008
reflects the positive results of the issuer bids that were completed during
year.
Regular distributions to Unitholders were $0.270 per Unit for the three
months ended December 31, 2008, unchanged from the same period in 2007.
Including the December special distribution, distributions were $0.35 per Unit
for the three months ended December 31, 2008.
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The following table shows the calculation of distributable cash(1).
Three Months Ended Twelve Months Ended
Dec. 31 Dec. 31 Dec. 31 Dec. 31
($000, except per Unit amounts) 2008 2007 2008 2007
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Cash provided by operating
activities $487 $(574) $8,538 $6,562
Adjust for net changes in
non-cash working capital
balances related to
operations 3,508 3,829 3,425 4,576
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Cash provided by operating
activities before changes
in non-cash working
capital balances 3,995 3,255 11,963 11,138
Repayment of long-term bank debt (235) 0 (566) 0
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Reserve for maintenance
capital expenditures (312) (312) (1,250) (1,250)
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Distributable cash(1) $3,448 $2,943 $10,147 $9,888
Distributions paid to
Unitholders $1,950 $2,149 $7,398 $8,652
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Basic income per Unit $0.304 $0.315 $1.041 $1.124
Distributable cash(1) per Unit $0.615 $0.367 $1.559 $1.171
Distributions paid per Unit $0.350 $0.270 $1.160 $1.030
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Outlook
With four consecutive years of solid results added to General Donlee's
growing track record - despite recent dramatic upheaval in the economy in
general - the Trustees and Management are cautiously optimistic that its
business strategies will help maintain near-current levels in the year ahead.
The $50.6 million sales order backlog is a good indication of the ongoing
demand for General Donlee's products; with the operational improvements and
equipment investments the Fund has prudently made in recent years, General
Donlee believes it is well-positioned to ride out the current recession.
Despite the economic realities at play in 2009, General Donlee's outlook
for the year ahead remains, on the whole, positive. The Company's operational
efficiency and its production volume remain steady. While the aerospace
industry is expected to decline slightly in the coming year, the Company's
diverse platform of products and wide customer base will help mitigate any
negative impacts. The Company is optimistic about our prospects, and look
forward to continued profitable performance for our Unitholders in the coming
year.
Company Profile
The Fund is a trust established to hold the securities of General Donlee
Limited, a leading diversified manufacturer of precision-machined products for
the military, commercial and general aerospace industries, and a specialist in
the manufacture of precision-machined products for the industrial products and
power generation industries. General Donlee's operating strategy focuses on
targeting niche markets for products that are aligned with its sophisticated
manufacturing capabilities and skilled workforce.
SEDAR Filings
Today the Fund filed its annual audited Consolidated Financial Statements
(including the notes thereto) and Management's Discussion and Analysis for the
year ended December 31, 2008 with SEDAR at www.sedar.com. These documents are
also available on the Fund's website at www.generaldonlee.com on the Financial
Reports page.
In addition to these documents, the Fund also files its Annual
Information Form, its Notice of Annual Meeting and Management Information
Circular, and its interim financial statements with SEDAR.
Forward-Looking Information
As with all forward-looking statements, caution must be exercised to
ensure that appropriate interpretation is made. Certain forward-looking
statements are based on information currently available to Management, but are
subject to a number of uncertainties and risks that could cause actual results
to differ materially from the results discussed in the forward-looking
statements. These uncertainties and risks include, but are not limited to:
dependence on commercial aircraft sales and defence procurement; dependence on
power generation sales and sales to the industrial sector; production rates;
shipping schedules and timing of deliveries; dependence on key customers;
dependence on third party suppliers and manufacturers; raw material costs;
competition; satisfying product specifications; product liability and warranty
claims; environmental and other government regulation; quality certification
requirements; hedging effects; ability to fund pension deficits, interest and
foreign exchange rates; leverage and restrictive debt covenants; continued
availability of credit facilities; regulatory requirements; reliance on key
personnel and the Company's skilled workforce; changes in accounting policies;
the ability to obtain orders, contract awards and terminations; input costs;
possible changes to the tax laws affecting income trusts; economic growth and
fluctuations (including the global credit crisis, and pension performance,
funding and expenses); and domestic and international economic conditions. In
addition, these forward-looking statements relate to the date on which they
are made. Although the forward-looking statements contained herein are based
upon what Management believes to be reasonable assumptions, the Fund cannot
assure Unitholders that actual results will be consistent with these
forward-looking statements, and the Fund disclaims any intention or obligation
to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. In formulating the forward-looking
statements herein, Management has assumed that business and economic
conditions affecting it will continue substantially in the ordinary course,
including without limitation with respect to industry conditions, general
levels of economic activity, regulation, taxes, foreign exchange rates and
interest rates, that there will be no material changes in its facilities,
equipment, customer and employee relations, credit arrangements or credit and
collections experience, and that the integration of new equipment will proceed
relatively smoothly.
Further information can be found in the disclosure documents filed by
General Donlee Income Fund with the securities regulatory authorities,
available at www.sedar.com or through the Fund's website at
www.generaldonlee.com.
For further information:
Gerald Thain
Chief Financial Officer,
tel: 416.743.4417
email: gthain@generaldonlee.com
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